Posts Tagged ‘investors’

When you rush to “sign up” a prospect as a client, an adviser, an investor and so on, counterintuitively you lessen the prospects of profitable business. Why? This is the relationship business. Foregoing time taken to properly build a trusting relationship gnaws away at the benefit of doubt the other party gives you, their accuracy in helping you make smart decisions and their commitment to help you prosper (reciprocity). Take a pause, invest quality time and keep offering reciprocal value.

Who get’s my time and interest? Two exploratory conversations with contrasting entrepreneurs with high-growth businesses this week.

Entrepreneur A: “Let me show you my powerpoint presentation.” Five minutes later in response to what are you seeking to accomplish and where might I be immediately helpful, “I am just looking for money, I don’t need anything else.”

Entrepreneur B: “Let me tell you where I am at with my business, where I’d ideally like to be in future and what I am needing to change including raising new money.” After ten minutes of discourse and accepted vulnerability, “I’d be interested in your advice for me.”

As investors we want confident, not humble entrepreneurs. We want entrepreneurs with high levels of self-worth and a willingness to be vulnerable. To voluntarily admit weakness and display smart judgement.

We don’t want defensive entrepreneurs or those, who seek to excessively control our view into their business. Entrepreneurs don’t have to be transparent, translucent will do fine. When your use of powerful language, social skills, and intellect is obscured from us, little wonder investors move on.

Here is my observation: have you adapted your behaviour to the life you now lead (entrepreneur), or insist on behaving as you learned to do in a former life as a former Citi banker, BCG consultant or CEO of a global company? 85% of the first-time entrepreneurs I meet persist in behaving as they have in their prior life with one obvious exception. Money. They happily claim poverty “I am not in the position I was….” at the mere mention of paying for advice. When the reality is they remain in the top 2% of the nation’s wealthiest people. It is simply not credible.

When business or investor prospects are drawn to your intellect, social interaction and your communication style, the relationship moves to a depth of reciprocal trust and respect where doing business together becomes “probable”, not “possible”. Counterintuitively, you get to that point, not by submerging business prospects in everything there is to know about you (marketing collaterals, credentials, deals) but impressively answering what the prospect wants to know.

You help yourself in advance, by visualising where you want the conversation to end up, the obstacles that might lie ahead, and natural responses to keep your conversation on track with maximum momentum.

You help yourself after the conversation, by examining what worked well and you can repeat successfully next time you meet, what didn’t work well and what you must improve when in the same situation.

Just because we can ski most slopes, doesn’t make us an “automatic” to successfully navigate a steep, icy couloir. We find help, take advice, practice, get feedback and make adjustments to our technique. Why do so many early-stage entrepreneurs, who have had some success raising money from mostly family and friends, forsake that adult learning sequence, and demand their advisers immediately “show them the way” to new investors? I’ll tell you, it is where their confidence has turned into blind arrogance.

If we don’t value our time, why should others? I have spent a good chunk of the past 3 years, inundated by entrepreneurs largely seeking help accessing global pools of predominantly private capital, at the seed stage. A timely blogpost yesterday by the insightful venture capitalist Fred Wilson reaffirmed a point that I have been reminding hundreds of individuals – “what is the return on your time invested, not your money”?

Here is what I see:

“The Poverty Entrepreneur“: A majority of individuals, who have been a success in their “past” but they don’t act like a success today (forever claiming poverty, reluctant to hire external expertise on equitable terms, seeking endless “free” favours without regard to others’ time). Often relics of large management consultants or banking.

“The Abundant Entrepreneur”: the rare, hidden gem, more often than not a seasoned entrepreneur, who is respectful of others’ time, willing to pay equitably for high quality advice and has a high level of self-worth.

“The Acquiescent Board Chair“: the well-known business person, who dabbles in young businesses either for affiliation needs with other impressive figures or the rare chance of a jackpot outcome. Very much a discretionary investment of their time, they are prone to ask apologetically for extended favours (contingent fee basis) from advisers, knowing in all probability it is a low return on everyone’s time invested but we are all in the “hope factory” together.

“The Scrambling Adviser”: A cohort of financial and corporate advisors (often solo and boutiques), who this IS their prime source of wealth. They are invariably failing to balance time invested, a sustainable business and a career successfully. Few survive for long without exploring alternatives.

“The Luxury Adviser”: A cohort of financial and corporate advisors, whose principle source of wealth (founding business, a banking career etc.) affords them the luxury of dabbling as advisors and investors in the seed area without regard to the actual return on their time invested.

“The Blunt Investor”: A cohort of professional investors, whose prime source of wealth arises from seed stage investing, time is precious and they are wont to give very blunt responses to requests for their time or flatly ignore them.

“The Luxury Investor“: A cohort of angel and high net worth individuals, whose prior success affords them the luxury of significant discretionary time. Driven by their intellectual curiosity and wealth (time and resources), they are more relaxed about time given to seed investments (an interesting alternative to “pro bono” advice and charitable giving).

“The Tax Investor“: A cohort of angel and high net worth individuals, whose tax structuring particularly in the UK attracts them to seed investing. They are cogniscent of time in so much as it enables them to understand the net financial consequences of seed investments.

You undoubtedly recognise some of these individuals if you have got this far, perhaps yourself. I am not here to tell you what you should do but I am here to urge you to apply critical thinking, and to ask, “is this a great way to surrender my scarce time, not just my money?”

“Who are you today?” I meet a great many $30mio-net worth plus co-investors in growth businesses, who arrive as free spirits but quickly find themselves as “prisoners” in their own mind. Convincing themselves that they are a smart investor in ultimately a profitable growth business, management team and market when recent performance and future indicators suggest the exact opposite. To a certain extent, you can understand entrepreneurs travelling through what I term a “delusional growth zone” (burning ambition and unmatched results) but you’d hope private investors and those advising them would avoid enduring extensive self-imprisonment. In my experience, “letting go” is a lot harder and painful for wealthy investors than most people ever imagine or discuss. Here is the rub: you cannot improve your situation unless you are willing to be intellectually-honest with yourself first (rational assessment), to not “fear” the consequences of moving on (ego) and to embrace rebounding from failure (accomplishment). This really isn’t about them, it is about you.

Who has done anywhere in the world what you would ideally like to accomplish? Who can help you translate that knowledge into wise decision-making consistent with your own strategic direction and goals? Who can help you acquire the skills, behaviours and expertise to institutionalise that learning?

We have reached a point in certain areas of tech, not least insurtech, where the numbers of entrepreneurs and advisers entering the arena weekly are greater than the number of entrepreneurs and businesses globally progressing from Seed stage to Series C stage. This week in Las Vegas and London, predictably, there will be thousands of promises made. The reality is that there are very few qualified advisers or investors. Certainly those that pass the above “litmus test”. Be careful, very careful.

When an entrepreneur or his/her Adviser overlook or cannot clearly articulate in 3 or 4 sentences, the greatest anticipated weaknesses in their business growth plans (markets, products, technology and relationships) given competitive market trends, you have a plan that won’t survive serious investor scrutiny. To pretend otherwise is to start driving a car where the wheel nuts lie strewn on the ground.

You are a C-suite executive or senior manager (probably with a successful career in a mid and large organisation) flirting with future advisory roles (Operating Partners, Senior Advisers and so forth) with private investors (Family Offices, Ultra High Net Worth individuals and some funds) and their portfolio companies. I meet half a dozen a month. Are you looking through your lens or that of the investor’s? When I ask bluntly, “why would a private investor be interested in you?”, most default to regaling their past (skills, expertise, accomplishments) or they way they like to work (imparting advice, influence, guidance). Here is the tough news, most private investors really don’t care. They want to know about

the “transformative value” (TV) for the investor after the Adviser has applied their past to the future of their investee businesses (logical reasoning – increased revenues, stronger brand, faster growth etc.)

the speed and quality of the “validation” (V) for the investor’s own reasons to back or not, a specific business (emotional reasoning – “am I going to look good”, enhanced credibility, mitigate personal risks, obtain future opportunities or relationships with peers, other investors, investee businesses etc.).

TV * V = Private Investor’s return on investment or “Great Deal”

“What”, “where”, “when” do you score highest as a potential Senior Adviser? Why? How do you get to those private investors with the highest need for that value?

Keep that equation and those critical questions uppermost in mind BEFORE you walk into your first meeting with a private investor.

“We need more investors, can you help?” is a request I hear daily from entrepreneurs and executives, co-investors and seasoned corporate finance experts. The obvious response is “yes, maybe or no”. Sometimes the obvious is not the most helpful to gain control of the conversation and kick start movement. Let’s frame the real “need”. Remove the irrelevant, focus on the relevant information. You will get dramatically quicker towards your goal.

You’ve asked for capital raising assistance. Are you talking about your ability to attract follow-on investments from your current investors, new investments from your current investors, new investors for your current businesses or new investors for new businesses? What is it exactly?

Then, I am curious where is your current marketing time and money being deployed? Is it being directed to all investors, or those within a specific geography, deal size, stage, investor type? There are 5 generic types of investor for you. Those that are apathetic, pretenders, aspirants, serial developers and leading-edge investors. The first three make up the majority of your audience and are the most price-sensitive, the final two are highly value-driven. Who exactly are you currently talking to? Would you recognise the differences (past relationships, capabilities, substance, style etc)? Let’s agree who you should be talking to?

Then, what are the existing or anticipated needs or needs that you can create for your ideal investors that you are uniquely able to address? How is your investor better off or personally better supported after realising their investment with your help? (Financial, intellectual, social, cultural improvements)

Then, who ideally has a need now or one that could be readily developed for that “return” on their investment? Who has the means and authority to approve the investment? Who can move quickly? Who is not overly prescriptive about the your “past”?

How do you best reach those investors and they you? (referrals, networking, publishing, speaking, awards, media interviews etc)

How do you create the ideal conditions? (eager to meet you, strong word-of-mouth)

How do you create the ideal time? (no disruptions, no delays)

How do you create the ideal location? (neutral, zero distractions)

How do you create the strongest first impression? (impressive content, credibility, rapport)

What competitive, distinctive or leading-edge offerings do you have to draw them in as a current or a future investor? (increasing investment, intimacy)

Are there gaps where you need to add new offerings or to create greater differentiation (value) between existing investor offerings?

What have you jointly agreed to do next? (exchange information, call, meeting)

You can see quickly here that framing your investor question, creates a dramatically sharper point on your arrow.